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Why Och-Ziff Capital Management Group LLC Stock Plunged Today

By Jordan Wathen – Feb 11, 2016 at 12:12PM

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Shares of the hedge fund manager are taking a beating as outflows pressure its fourth-quarter earnings.

What: Shares of Och-Ziff Capital Management Group LLC (SCU 1.48%) are plunging today, declining more than 14% as of 11 a.m. ET after the company reported discouraging earnings for the fourth quarter.

So what: Och-Ziff disappointed investors with a distributable earnings loss of $36.1 million, or $0.07 per share, for the fourth quarter compared to a consensus estimate that it would break even on a distributable income basis. Furthermore, it said it would not pay a dividend this quarter, whereas analysts expected a small distribution of $0.02 per share, according to Reuters.

The company reported that it had $45.5 billion in assets under management (AUM) at the end of the fourth quarter. It estimated that AUM declined to start 2016, dropping to $43.7 billion as of Feb. 1, 2016.

Last year simply wasn't the year investors wanted to see. Och-Ziff lost roughly 4% of its AUM in 2015, due entirely to customer redemptions (outflows) and distributions to its investors.

Now what: Och-Ziff's funds continue to lose fee-earning AUM, and declines may be accelerating. In Jan. 2016 alone, the company lost $1.2 billion of AUM to outflows, equal to its outflows for full-year 2015.

Unless its fund performance improves, 2016 could be another challenging year. Revenue fell 50% in the fourth quarter compared to the year-ago period, due mostly to a decline in incentive income earned for meeting return requirements on its funds. Incentive income makes or breaks its year, and 2016 will be no different.  

Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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